Inventory & Inflation - Essay Example

Extract of sample Inventory & Inflation

This process normally involves controlling the units coming in with an aim of preventing the inventory from excessively rising or declining to levels that are too low to jeopardize the operation of the business. Proficient inventory management seeks to control the costs of goods from the perception of the tax burden and the total cost of goods. Inventory management and inflation are concepts that are closely related in the running of the business. The increase of prices of goods and services determines the units to be purchased since this is influenced by the money at hand. If the capital of the business remains constant, the goods being purchased reduces due to increase in their prices. One has to monitor the trend of the inventory since this determines the time and process of making an order. First moving goods are purchased regularly as compared to those that take a longer period of time. Inflation does not only affect the business owners but also the consumers of goods. For instance, when prices go up, the purchasing power of the consumer is reduced. This forces the consumer to do away with some commodities since there those which are given more priority than others. The business owner has to make a decision on which goods should be stocked basing on the fact that his purchasing power has also reduced due to
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Summary

It is more intricate phenomena related to the supply of money and currency values. An increase in the supply of money leads to a reduction in the value that is associated with that currency (Alfredo, 2000, p…

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In the same way, it will provide an analysis into some of the effects of inflation while focusing on the different types of inflation arising from different economic situations. Introduction Inflation is described to be a rate in which the overall price of goods and services is increasing while the purchasing power decreases in an economy (Nicholson 57).

In effect, inflation is the loss or the diminishing of value of money in a given economy (Blanchard 45). In plain language, inflation is the instance where goods and services get expensive or the phenomena where people complain that the price of commodities is rising.

The effects of inflation can affect an economy in positive and negative ways or both positively and negatively simultaneously because it affects the differently. In many circumstances, there are different explanations that could be given to the rise of inflation in an economy and which could explain the reasons why a currency can lose its purchasing power as compared to different circumstance in market.

Businesses are reluctant to make investments during periods of volatile inflation. Countries suffer from a tax rate that is based on pre-inflationary periods that are less than the current value. It also causes exports to go down as prices go up resulting in a trading deficit.

Although it shows a decrease in the level of profits, but it helps in reducing taxes for the company (Brinlee, n.d.).
Under FIFO system, goods that are added to the inventory at first should be sold before the recently added items. Companies using this

effect that it will now require more units of money for the same goods and services purchased or the number of goods and services purchased with the same amount of money is reduced. In effect, inflation is the loss or the diminishing of value of money in a given economy

This discussion concludes by outlining control measures necessary to manage inflation and the alternatives polices that can be taken by the government to manage inflation.
Inflation refers to increment of price levels in

Inflation refers to increment of price levels in general that is the rise in prices in not on individual commodities but in all areas over a period of time. It’s a change expressed in percentage and compared over

7 pages (1750 words)Essay

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